External Reference Pricing Could Reduce Drug Costs in the United States

The average price for single-source brand-name drugs is higher in the United States than in other countries, indicating that external reference pricing could reduce costs.

HealthDay News — The average price for single-source brand-name drugs is higher in the United States than in other countries, indicating that external reference pricing could reduce costs, according to a study published in the May issue of Health Affairs.

Noting that many countries use external reference pricing to help establish drug prices, So-Yeon Kang, M.P.H., from the Johns Hopkins Bloomberg School of Public Health in Baltimore, and colleagues compared price differentials between the United States and the United Kingdom, Japan, and Ontario for single-source brand-name drugs that have been on the market for at least three years. The authors sought to examine the potential impact of external reference pricing.

The researchers found that after rebates were considered, the prices averaged 3.2 to 4.1 times higher in the United States. For individual drugs, the price differential varied from 1.3 to 70.1. The differential was greater the longer a drug remained on the market. By adopting the average price of drugs in the reference countries, the estimated savings to Medicare Part D would have been $72.9 billion in 2018.

“Using external reference pricing as a method to monitor or negotiate prices for established drugs could provide significant savings to the Medicare program,” the authors write. “Most importantly, it would contribute to improving the affordability of drugs for patients.”